Is 72t Busted???????
L1: Is 72t Busted???????My wife established a 72t in 2008 using two of her IRAs with Morgan Stanley. One of the IRAs was managed by MPMG, LLC and management fees were deducted in 4Q2008 from the IRA. Prior to the end of 4Q2008, she decided to invest this IRAwith another manager and pulled out of MPMG, LLC. This week she received a refund of $116.00 for the unused 4Q2008 management fees.Is her 72t busted???? Will she receive some type of 1099 or other form that will alert the IRS?Your advice is greately appreciated.2009-01-17 22:18, By: RetiredBob, IP: [126.96.36.199]
L2: Is 72t Busted???????Probably not but it could be headed that way. You can’t take ANY distributions from a 72t plan, other than that calculated when the plan was set up, using one of the 3 IRS accepted calculation methods. Fund expenses are a cost of investing, so paying them from your IRA does not affect your 72t plan. Capital gains and losses due to market swings also do not affect your 72t plan validity. You should be able to redeposit that money back intoone of herIRAs… and quickly.Talk to her new custodian, tell them the story and that you want to redeposit this money back into one of her IRAs. If they balk at that, it also might be possible to keep this money and then reduce her annual distribution by the same amount. That way, the annual distributionamountsfor 2009and 2008 will be the same and her 1099-Rs will show it.The IRS only knows how much you receive per year, so if this money came out and went back into the IRA in the same year, there should be no 1099-R statement about her getting it. If the distribution was made in 2008, however, you may have a serious problem that should be discussed with a CPA or CFP who is well versed in 72t plans.2009-01-18 03:44, By: Ed_B, IP: [188.8.131.52]
L2: Is 72t Busted???????Bob,Since the transfer was made in 2008, if made between the IRA trustees there will be no 1099R. This is important because if there is no 1099R the one rollover available per IRA account in a rolling 12 month period is preserved. You will know by mid February if one will be issued or not.You should also try to confirm with the original custodian how they will handle the $116.00 distributed in 2009. I think they will issue a 1099R for it in 2010 but you need to know NOW what they will do. If they indicate that it will be reported in 2010 for 2009, then the 72t distributions for 2009 need to be adjusted to reduce them by $116.00. This would be better than rolling the funds back to the current IRA because it would use up the one rollover and it is better to preserve that for any later rollovers needed to correct any different foul ups in the future.While it is advisable to avoid account transfers while in a 72t unless the benefits are very compelling, any that must be done should be done by direct trustee transfer to preserve the one rollover and also eliminate more 1099R and 5498 forms coming out.2009-01-18 07:13, By: Alan S., IP: [184.108.40.206]
L3: Is 72t Busted???????Further clarification. The custodian of both her IRA accounts was Morgan Stanley. Even when the account was managed by MPMG, LLC, the account was a MS account number. The monies in the IRAs never were transferred to MPMG, they just managed the funds and MS bought the stocks. The$116.00 refund however did come from MPMG, LLC. Does this change things? MPMG should not issue a 1099 since the IRA monies stayed under Morgan Stanley at all times. Thoughts!2009-01-19 00:13, By: RetiredBob, IP: [220.127.116.11]
L2: Is 72t Busted???????What m I missing?Since she received the $116 distribution in 2009, merely reduce the 2009 SEPPdistributionamount by $116.The total distribution for 2009 will then be what it should be.If it ever gets questioned, merely be prepared to document it. The 1099 should be no big deal since you will probably be filing a form 5329 anyway.2009-01-19 00:42, By: Gfw, IP: [18.104.22.168]